When citizens expect higher taxes and inflation they will shift from financial assets to tangible assets. One can enjoy jewelry, real estate, antique cars, new furniture, vacations, boats, art and collectibles without having to pay tax on their enjoyment and can feel wealthier as their tangible assets inflate in value tax free (at least tax deferred if they ever actually sell it). Higher taxes on investment income will surely drive more money into tangible assets. Expectation of higher inflation will increase the diversion. Inflation and taxes are two sides of the same coin; one monetary and one fiscal.  Both induce one to work and produce less. Inflation pressures quick consumption and the acquisition of tangible assets to avoid the loss of monetary value.Financial assets are an investment in the future; tangible assets are an investment in today. Driving money out of investments for future growth into tangible assets hurts economic growth and retards long term thinking, a...(Read Full Post)